I really enjoy the free content provided by McKinsey & Company’s Insights. If you haven’t already signed up for their free newsletter, go do it — it is one of the sources of business and leadership inspiration I never miss. It is a wonderful example of establishing thought leadership through content. And just to be clear, I have no business connection to McKinsey, I authentically admire their work and recommend it.
A recent post, The sevent traits of an effective digital enterprise by Londoners ’Tunde Olanrewaju, Kate Smaje, and Paul Willmott was particularly thought-provoking. I thought I would summarize the main points and add my own two cents to the discussion. You might like to chime in with your own observations in the comment section.
1. Be unreasonably aspirational
Some companies frame their targets by measures such as growth or market share through digital channels. Others set targets for cost reduction based on the cost structures of new digital competitors. Either way, if your targets aren’t making the majority of your company feel nervous, you probably aren’t aiming high enough.
Schaefer view: I agree, assuming a digital competency is already established. However, if this is entirely new, stretch goals can kill momentum and provide ammunition to the critics. If you are early in your digital journey, build “quick wins” into your initiative to create an initiative that grows.
2. Acquire new capabilities
Schaefer view: I completely agree. Most companies can’t afford the time to groom or re-train talent. Bring in established leaders and give them room to perform.
3. ‘Ring fence’ and cultivate talent
After a few false starts, Wal-Mart Stores learned that “ring fencing” its digital talent was the only way to ensure rapid improvements. Four years ago, the retail giant’s online business was lagging. It was late to the e-commerce market as executives protected their booming physical-retail business. It eventually established @WalmartLabs, an “idea incubator,” as part of its growing e-commerce division in Silicon Valley—far removed from the company’s Bentonville, Arkansas, headquarters.
Schaefer view: The Wal-Mart approach worked (increasing revenues 30 percent in 2013) but it is also extreme and risks turning digital into a silo, or even worse, disconnecting it from the business entirely. There is something to be said for giving a digital team “space” and some autonomy in an established company as long as you can also create integrated marketing efforts.
4. Challenge everything
In 2007, car-rental company Hertz started to deploy self-service kiosks similar to those used by airlines for flight check-in. In 2011, it leapfrogged airlines by moving to dual-screen kiosks—one screen to select rental options via touch screen, a second screen at eye level to communicate with a customer agent using real-time video.
Schaefer view: This is a timely point that connects to the “Is Being Disruptive a Strategy” podcast Tom Webster and I recently published. Was the Hertz example a true disruption, a new business model, or a logical improvement on the kiosks and competencies they already had?
I agree that companies must be in a constant state of re-invention but realistically, how many companies can strategcially disrupt themselves? Practically speaking, most managers just want to hold on to their jobs and get a bonus. There are very few examples of successful disruptions that were internally-induced. More likely, companies can counter-attack or buy the disruptor.
5. Be quick and data driven
Integrating data sources into a single system that is accessible to everyone in the organization will improve the “clock speed” for innovation. P&G, for example, created a single analytics portal, called the Decision Cockpit, which provides up-to-date sales data across brands, products, and regions to more than 50,000 employees globally. The portal, which emphasizes projections over historical data, lets teams quickly identify issues, such as declining market share, and take steps to address the problems.
Schaefer view: Amen.
6. Follow the money
Often, great value is found in optimizing back-office functions. At Starbucks, one of the leaders in customer-experience innovation, just 35 of 100 active IT projects in 2013 were focused on customer- or partner-facing initiatives. One-third of these projects were devoted to improving efficiency and productivity away from the retail stores, and one-third focused on improving resilience and security.
Schaefer view: I think this is an excellent point and one I wish would be recognized by more businesses. A different McKinsey research report in 2012 said that MOST of the money is in cost savings, particularly in applying social technologies to areas like Procurement and the Supply Chain. In a research project I worked on last year for the US Air Force, my team found almost no evidence that these technologies are being embraced this way.
7. Be obsessed with the customer
This customer obsession is what enables companies to go beyond what’s normal and into the extraordinary. If online retailer Zappos is out of stock on a product, it will help you find the item from a competitor. Little wonder that 75 percent of its orders come from repeat customers.
Schaefer view: Can’t argue with that. Still, if I read about Zappos one more time in a case study I will gouge my eyes out.
Now it’s your turn. What’s your take?
The illustrations in this article were also featured in the original post. So not only does McKinsey have great content, they also present it in a beautiful way. A lesson to be learned there.